Did you take advantage of the Help to Buy equity loan? Are you about to start paying interest?

In April 2013 the UK government released a scheme that would help first time buyers and home movers onto the property ladder by making homes more affordable. The scheme allows buyers to purchase a property with the assistance of the equity loan which effectively reduces the purchase price of the house by 20%. The buyer would then only have to secure a 5% deposit and a 75% mortgage making it easier for a first time buyer to get on the property ladder.

Once the property has been purchased, the equity loan sits on the property interest free for five years. After five years the buyer would then have to pay interest on the loan on a monthly basis.

Five years later

The scheme was only supposed to be offered to first time buyers for three years however the government decided to extend and as result, more buyers are utilising the assistance of the loan.

Any buyer who purchased their property with the Help to Buy equity loan five or more years ago is now being charged the loan’s interest rates on a monthly basis meaning that they have two payments going out of their monthly budget for the mortgage and loan on the property.

How to repay the Help to Buy equity loan

Any buyer who has used this scheme would need to pay back the equity loan once they sold the property that was subject to it. However buyers whose properties are subject to Help to Buy equity loans are able to repay their loan back to the government and arrange for the loan to be removed from the property without selling the property also. This would stop any interest being paid on the loan after the five years. This can be done through their own private savings or by re-mortgaging the property to consolidate both loans into one.

If you are repaying the equity loan back in full through private funds or re-mortgaging buyers will need to instruct both a surveyor to value the property as well as a solicitor to arrange for the equity loan to be repaid.

Our residential conveyancing team are very experienced in this area and would be willing to assist any clients who would like to repay their Help to Buy equity loans early. Call us now on 01616 966 229.